Citibank recently settled a PSLRA case alleging $6.3 billion in damages for $590 million, nine cents on the dollar. The opt-out deadline was December 5; the objection deadline December 21; the settlement administrator got around to mailing out the notice to class members like me December 6; I received the mailing December 12, and confirmed my class membership December 14. I've filed an objection to the late notice, but of larger concern to the class is the fact that the attorneys are asking for over $100 million, some $30 to $75 million more than what they're legally entitled to. The fairness hearing is January 15, but I have an argument in Houston January 16. With the compressed schedule, I could use some help.

The easy thing I'm looking for is a declaration. The law of lodestar is that attorneys are entitled to request market rates for attorney work. But in this case, the class counsel is asserting that the market rate for the temporary attorneys they paid $30 to $45/hour for is between $350 to $550/hour—subject to a 1.8 multiplier on top of the gigantic markup for "overhead." Of course, I know darn well from experience and conversations with defense and in-house counsel that no paying client agrees to pay more than $50/hour (give or take) in gigantic litigation for first-pass document review of 40 million documents; and I submitted a declaration to that effect. But if you're a defense or in-house counsel with experience with billing willing to submit a declaration about the going rate for large-scale document review, the additional evidence can't hurt. Because my objection is only to the fee request, and not to the fairness of the settlement, this wouldn't present the normal conflict issues my other objections would.

Similarly, I could really use some pro bono or contingent help from skilled experienced counsel located in the Southern District of New York and able to devote some real resources to this case in January. The court received my request for ECF access on December 21; as of the morning of January 2, there has been no action on it. I am concerned that I am not being taken seriously as a pro se. Again, because my objection is only to the fee request, and not to the fairness of the settlement, this wouldn't present the normal conflict issues my other objections would; and with tens of millions at stake, this is plausible for contingency-fee work.

There are a lot of important issues in this case that the Center for Class Action Fairness hasn't previously addressed.

The question of compensation for first-tier document review has been poorly handled by the courts, in part because no one has ever submitted the right evidence to challenge it. No paying client would agree to $550/hour attorneys doing first-pass document review; the law firm here claimed that the style consultants moonlighting as temp attorneys working for a third party and getting paid less than a tenth of that were firm attorneys. (That's before the question of whether the document review is intentionally conducted in an inefficient manner to inflate the hours, which won't be challenged since the scanty billing records are going to be inscrutable in the week that class members have to look at the Rule 23(h) fee petition.) This issue has been covered by Lester Brickman and, sadly, no one else.

The PSLRA freezes discovery until the motion to dismiss is resolved; if the plaintiffs survive the motion to dismiss, 82% of securities cases settle. Given that nearly all the investment is after it becomes very likely that the attorney is going to be paid, why is a 1.8 multiplier necessary to attract competent legal counsel?

Lester Brickman has also written about the "bless these fees" experts who rubber-stamp every fee request. The experts here were no different: they cherry-picked empirical evidence; one used boilerplate to assert that the "risk" meriting a multiplier and accounting for the small size of the settlement included the threat that Citigroup would go bankrupt because of the litigation; they bald-facedly called a $0.09/dollar nuisance settlement a "success." A really shameful performance. I hope to be able to depose them.

The PSLRA requires the fees and expenses to be a reasonable percentage of the amount the class actually receives. Few fee petitions follow the law; neither this one, nor either of the expert reports even mentioned it. Of course, the amount the class will actually receive is not disclosed in the notice or in any of the papers.

Brokers regularly take two months to provide lists of names to settlement administrators. It's happened in every securities case I've been involved in. Settlement administrators know this, dawdle in requesting the names, and then point fingers when the notice is late. How is it possibly acceptable to send reasonably foreseeable late notice instead of establishing a schedule that accounts for the inevitable two-month delays? Again, no one has ever made the right argument challenging this problem.

(As always, my class-action objecting is not on behalf of the Manhattan Institute.)

3 Comments

The contract attorney issue is interesting. IMHO, if they're really working as contract attorneys, paid on a limited engagement (like hourly) with no benefits, then their work should billed as a expense (like any other outside vendor), not as attorney time. The fact that plaintiff's counsel had to pay those expenses should be factored into a multiplier for the lodestar, because it reflects enhanced risk.

FWIW, I think you should minimize or drop the arguments about plaintiff's class counsel not taking a risk with the case, and focus on the contract attorney part. Plaintiff's attorneys put over 100k hours and $2M on the case, and did indeed make it through most of discovery. That's real work and real money, and I doubt you're going to convince a judge that it was low-risk litigation.

You might have a winning argument on the contract attorney issue. If the plaintiff's firms want to hire them then work them like plaintiff's attorneys, or associate themselves with smaller firms and solo practices, then more power to them, but the use of contract attorneys represents a fundamentally different form of risk. It's an out-of-pocket expense, it's not the same "missed opportunities" risk taken on when an associate / junior partner is dedicated to a particular case.

I agree with the timeframe complaints regarding receiving the so called "settlement offer" without time to review before the deadline. The Court settlement details said every settlement class member will be bound by the settlement unless you opt out. "The exclusion request must be received no later than December 6, 2012." However the person above didn't receive the court documents until 12 Dec, which doesn't allow any due process for the class members. I don't believe I received the request until after 6 Dec 12 either. I don't recall seeing a date on the envelope (and no longer have the envelope). That
process doesn't allow class members the option to opt out of the settlement. If the mailed out offer is the "final settlement offer" then I would opt out.

I bought 1,000 Citigroup on 2/11/08 ($26,068.20) and sold on 12/28/09 ($3,370) for net loss of about $22,698.20 (excluding commissions).
The "settlement offer" (page 7, #44 D Table A) offers $.10
per share (minus $.03 for lawyers, possibly plus more fees).
I've lost $22,698.20 and the settlement would pay me about $70.
That seems like a scam to a shareholder rather than a settlement.

I bought 20 (2,000 share equivalent) Jan 25 leap (call) options
on 2/27/08 for $8,800. I believe they expired worthless on the 3rd Friday in Jan 09 for a loss of $8,800. Leap (Call type) options aren't even mentioned in the "offer".

Overall I lost over $30,000 on Citigroup common stock and Leap options I bought during the listed timeframe, but the "offer" amounts to about $70 (which to me is a farce).

I'm not an attorney, but I think not allowing the option to opt out (by the settlement not having been mailed out until after the 6 Dec 12 deadline), and not including losses from having bought calls or leap options would both indicate a lack of due process and a lack of fairness.

"The court received my request for ECF access on December 21; as of the morning of January 2, there has been no action on it. I am concerned that I am not being taken seriously as a pro se."

I don't know why you would assume the SDNY does not take pro se litigants "seriously" instead of just chalking the delay up to the holidays and a benign snafu; things have been in somewhat of an upheaval at 500 Pearl St., due to the 2nd Circuit's move from there back to the freshly renovated Marshall Courthouse in Foley Square. Have you checked the Junk folder of your e-mail account (the Filing User registration notice might have landed there); have you contacted the friendly folks at the SDNY's ECF Help Desk? Their telephone number: (212)805-0136, ext. 0800.

Good luck!

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